Not yet, anyway. It depends on how things transpire. If MacMillan and Penguin settle, then we can actually discuss what the case means for us, if anything. Sometimes large corporate lawsuits have an impact on the vast business in its internal practices, but means nothing to the cogs in the machine (us small fry). Sometimes large corporate lawsuits change everything.

Is this one a game-changer? Again, we don’t know.

We would be having a different discussion if we worked at Penguin or Apple or MacMillan right now. Or if we worked at (or ran) Amazon or Barnes & Noble. (The announcement of the filing had an immediate negative impact on B&N’s stock price, for example)

. . . .

Why didn’t they go after Amazon? the pundits are asking. Amazon is the Big Bad here. Forgetting, of course, that the five publishers and Apple were responding to Amazon’s domination of the marketplace in 2008-2010 when the actions cited by the DOJ occurred.

And as Charles Petit points out, a resolution in this case will have an impact on Amazon and Amazon’s relationship to its publishers because Amazon also uses a term in its contracts that Apple used in its—the Most Favored Nation clause. This clause was specifically cited by the DOJ, and referred to in the settlement with the three publishers.

If the Most Favored Nation clause becomes poisonous in relationships between Apple and its publishers, then it follows that the clause will become poisonous to other retailers and the publishers they deal with.

. . . .

If you’ve read this blog for the past three years, you’ll notice that I often advise you to settle problems early to avoid even the possibility of lawsuit. For writers, that usually means making certain that you understand contract terms so that you know what you’re signing. You have to know what you’re giving up as well as what you’re settling for. You have to know how those terms will apply to a successful project as well as an unsuccessful one.

. . . .

The problem here for the publishing companies is that, as part of this suit, the Justice Department will be looking at book prices and profits. When you look at book prices and profits in an old-fashioned business like publishing, which has really not updated its computer systems to account for e-books in particular, you will be looking at accounting practices.

Accounting practices include royalty statements, and relationships with authors. Many of the bigger publishers have fudged the royalty statements and their e-book accounting systems, either deliberately or because of antiquated systems. See this post to understand what I mean. In at least one case, systems have not yet changed within the publishing house.

If the two publishers involved in the actual case change their accounting practices now, is it something the DOJ will look at as a way to avoid parts of the lawsuit? Is it just normal business practices? Or is it something more sinister?

Because as Blankenhorn writes, “actions that seem perfectly natural in any other context take on a whole new meaning” when antitrust lawyers are investigating a company.

. . . .

So what does this mean for writers?

As a writer who keeps one foot in traditional publishing, I’ll be keeping my eye on the earnings reports from MacMillan and Penguin, the sideways news stories that come out of this case, and on the companies’ overall good health. Because there is stuff to be found in the accounts of most traditional publishers due to old-fashioned systems, neglect, and long-standing disregard for contracts and contract terms. Today’s decisions by two major publishers will have an impact that will be felt in a variety of ways. We just don’t know what those ways are.

. . . .

In other words, folks, those of us publishing indie will actually benefit from this week’s press coverage—if we are willing to price our books above bargain basement pricing (free/99cents/$1.99). The media is repeating that $9.99 novels are bargains. And those listening with half an ear will absorb that thought, and never examine it. So when they see your e-book priced under $10, they know they’ll be getting a bargain.

And those folks pricing at 99 cents or $1.99? Well, their books will be treated like those books sitting outside a bookstore in bins to attract customers. Readers usually give those books a glance, then walk on by. Only readers looking for something special or bargain hunters actually stop.

8 Comments to “Writers and The DOJ Lawsuit”

While I respect the insights of Ms. Rusch, I disagree about cheap e-books as bargain bin cast-offs. I think that in many cases they’re becoming a whole new market niche, more akin to the Taco Truck than the bargain bin.

The Taco Truck sells cheap lunch-time fare, the nutritional and gastronomical qualities of which are often questioned. And yet the food is oh-so-delicious (if you’re into that sort of thing) and it’s AUTHENTIC. Its loyal customers don’t want to sit down in a nice place and eat the plate a chef serves them– they do that on the weekends. Today they want a greasy, fun lunch experience for five dollars. That’s exactly what the Taco Truck delivers.

We may not see the next James Joyce selling online for 99 cents, but I bet that’s what Edgar Rice Burroughs and Robert E. Howard would have priced at if they were self-pubbing e-books. Maybe even John Steinbeck or Ayn Rand, in their eagerness to spread their social messages farther.

I think that some are still making the comparison of online book shopping to brick and mortar stores. It isn’t really apples to apples. It’s more apples to strawberries. On bargain bins or tables in physical stores, a browser has to shift and dig and move books. Childrens books, fiction, cookbooks, are jumbled together and the only common denominator is the price.

Online, many readers search within their genres and the 99 cents books show up in columns with the other titles. Granted, there are daily “specials” that lump them together but the titles still remain in their genres as well.

It’s still all about discovery and the online stores arrange things in such a way that is more beneficial to the lesser known writers since cover art is displayed equally for all; rather than the physical shelf format of some cover turnouts with most books displayed spine out.

True, but from a price-point perspective you have to consider the “self-published work is all crap” meme and now the “publishers can’t afford to price books at $9.99” meme.

We’re talking about an expanding market place, not just people who have been buying e-books for months, but people new to the format. They may well get burned in that first flush of download any free book you see or any cheap book you see. There is, after all, a lot of crap out there; that’s a given in any creative space.

And a lot more people are going to be moving over to e-books after all this free publicity. You can see it with writers. People who were virulently opposed to self-publishing last year are putting their stuff up for sale this. The same thing is happening with readers. People who slagged off e-books, because they weren’t real book and so forth, are now buying e-readers.

I think the pricing structure gets complicated for newbies because the standard price-points might be sending out the wrong message, if Kristine Kathryn Rusch is correct.

Okay, $0.99 for a short or an instalment for a serial. That makes sense. 5000 words or so isn’t really going to sell for much more.

But novellas at $2.99, is that still valid? Or should you price at $3.99, $4.99, will the market bear that? What about if it’s a ‘short’ novella of 20K as opposed to a short novel at 60K?

And full-length novels at $4.99, is that going to look too cheap to consumers if they think publishers are making a loss at $9.99.

For more established authors, with a decent list already up and more experience of the market place, this is all a very good thing. But for newbies it’s a bit of a minefield. I, for instance, don’t know if readers will actually want to buy my stuff. I probably won’t have a decent inventory until the end of this year, not if I want to keep the quality up.

So where do I set my initial price for my initial novella (which is going through developmental editing at the moment, then a copy edit, and so on). I was figuring on $2.99 (or whatever the British equivalent is, I think it’s £1.49) as a pretty vanilla price-point. I can start playing with price once I have more stuff up and can use loss-leaders and all the rest. Right now it’s a matter of building inventory in the hope the sales will come.

But is $2.99 too low a price now? Should I price it higher to show a belief in the quality. Or do I run the risk of pricing myself out of the marketplace before I even start?

I’m not actually asking for advice on this. And I’m not touting my book either (it’s not even out there yet — and I have no intention of becoming one of those “I noticed you followed me on Twitter, please buy my book” writers). I’m just using my situation as an example.

Pricing is difficult for a newbie and it just got, IMHO, a whole lot more complicated.

“For more established authors, with a decent list already up and more experience of the market place, this is all a very good thing. But for newbies it’s a bit of a minefield.”

One thing you have to remember – writers are not famous.

Even the biggest name writers on the planet are not famous.

There are a lot of people who have no clue who Stephen King is, or James Patterson, or whomever. Two years ago, before I got into this writing gig, if you’d asked me who Neil Gaimon was, I would have said, “Who the hell is Neil Gaimon?” And I read a lot. But I’d never come across his work before. Hell, I’ve still never read him. I’ve never read Patterson either, though I was just given a book of his as a gift, so I guess I’ll see what I think.

Point is, the “established writers can charge more for their work than new writers” meme is false. Utterly false. You don’t see publishers discounting their new writers into the discount bin because they’re new. So why should new self pub writers do that to themselves?

Nah, Mate, I’m talking about writers established enough enough to understand how to play the price-point game. Not the ones that are famous enough to charge more. And to be fair, if you are one of the really big name authors with a following of millions, JK Rowling, for instance, then you really can charge more. Scarcity, only they can write what they write (though they should take care not to fleece their readers). Other writers, even relatively well-known ones, not so much.

But no, I’m not insecure about my writing, I know I have good craft skills and the ability to tell a story. There is always the worry about whether people want to read the stories I want to tell, but that is just rational humility — which forestalls arrogance and preening like an ‘I’m so special’ popinjay.

What I am insecure about is all the other stuff: the marketing, the promotion, and the price-points, the business side of it all, and the legal side. In that I have no skills built up over the decades and I am unsure if I have any talent for it.

Writing I can do (as far as I can tell) and business bloody terrifies me, but I’ll suck it up and learn, because what else am I gonna do?

Here is how I, as a consumer, think of price points: what would I pay for the print version of this book? Take 30-50% less for ebook because there are none of the physical costs involved in printing, warehousing, shipping. If the book in question is hardcover–sells for $26 cover, $18 standard amazon discounting, then ebook would maybe work at $12 if and only if it was an established author and the price was guaranteed to come down once the immediacy of getting the book right away has worn off. If it’s a mass market paperback, the ebook should be about $5-6 (since mmpb’s go for $7-9 these days).

That’s based on customers who are used to paying bookstore prices for physical goods–digital should always, ALWAYS be cheaper.

I don’t know how low prices can go and still be valued. My personal judgment call was to put novellas at .99 because no one out there knows who the f i am, and that’s also more or less the price of my part of a 4-novella (by 4 authors) anthology less 30%. But I’m not quitting my day job, either. With the novel in progress I am planning to price more like $4-5, depending on how the market looks in 3-4 months (assuming writing/editing goes as planned, which, you know…)